If you want to spend at least $1 million on a ready-made home, you’ve come to the right city.
You can choose from one of several Traditional Neighborhood Developments—or projects that closely mirror TNDs—that have sprung into mixed-use life around Baton Rouge in recent years. Developments like Rouzan, Pointe Marie, Valhalla, The Settlement at Willow Grove, Long Farm Village, and Adelia at Old Goodwood. And more projects targeting the high-end buyer are on the way, including a 13-lot residential community being planned along Brentwood Drive near the Country Club Place development that has home prices starting in the $500,000 range.
A cursory search of the MLS shows 113 active, single-family homes currently on the greater Baton Rouge market listing for at least $1 million, of which 84 are located inside the Baton Rouge city limits alone. Meanwhile, the greater area also saw the number of sales of new construction homes in the $1 million price range grow from two (2016) to six (2017) to seven (2018), indicating increased homebuilding.
It’s amassed a nearly two-year supply of million-dollar-plus homes in the greater market, leading many local real estate experts to say the high-end market—particularly in Baton Rouge—is overstocked.
“At some point, it feels like we’re going to run out of space to build,” says Scott Gaspard, a senior partner with RE/Max First, who closely follows the market. “A lot of people are competing for the same market. It’s a good time to be a buyer.”
Some, like Gaspard, chalk up the lacking demand to affluent buyers’ preference toward customization, with others adding millennial tastes—different from previous generations—contribute to slow activity with the existing housing stock. Also, despite anticipating lower interest rates than usual, buyers wanting to upgrade from a $500,000 home might not want to double their property taxes and insurance rates by moving into a $1 million home, instead of opting to tear down and flip a house.
Whatever its roots, everyone recognizes the result: There are too many pricey homes in certain local pockets, and not enough buyers to go around.
“At some point, it feels like we’re going to run out of space to build. A lot of people are competing for the same market. It’s a good time to be a buyer.”
SCOTT GASPARD, senior partner, RE/Max First
Largely driving the trend is a philosophy adopted by many buyers willing to spend above a certain price point, which Gaspard observes to be $1 million: If they’re going to invest that much into a new home, why not make it a custom build, adding all the bells and whistles they want in real time?
“Once you cross that million-dollar threshold, you’re going to build exactly what you want,” says Tom Fereday, Hancock Whitney senior vice president of private banking, who over the past 27 years has provided hundreds of millions of dollars to finance high-end Baton Rouge homes—an increasing number of which, he adds, are custom builds.
Though Fereday notices a lower volume of purchase contracts coming through his office this summer than is typical for the busy season, he says Hancock Whitney isn’t sounding the alarm for a spec bubble burst just yet. Instead, its private bankers are keeping busy as more clients use the bank’s construction lending service.
Such services also hurt chances of filling the existing supply of high-end homes, says real estate agent Quita Cutrer of Burns & Company, such as those in Country Club of Louisiana.
“Now, we’ve got all these new subdivisions and they’re competing with existing houses,” she says, noting the number of million-dollar spec homes in the City of Baton Rouge alone has quadrupled since 2016.
A prime example is The Settlement at Willow Grove, where 26 homes—ranging in price from $464,500 to $1.5 million—are sitting on the market, eight of which are single-family specs listing for at least $1 million on the MLS.
Richard Carmouche, who has been developing the area since 2007, attributes the mass of listings to a natural level of turnover that’s taking place as people who bought some of the first Willow Grove homes a dozen years ago are putting them on the market in order to either transfer for work or upgrade to a new house—which, in some cases, is down the street.
Aiming to close on the homes, Carmouche says he’s been stocking them up with more amenities that generally entice buyers.
“A spa or a pool is getting to be pretty commonplace now, so we’re upping the ante,” he says. “We’re loading up on outdoor amenities, since we’re a courtyard-oriented neighborhood.”
But Willow Grove isn’t the only TND swelling the local inventory. Cutrer recalls a recent instance where a builder in the upscale Valhalla neighborhood, wanting to get his spec off the market, shaved some $300,000 from his original asking price before closing on a sale.
Those don’t even count Adelia at Old Goodwood—Mike Hogstrom’s residential development surrounding the 165-year-old Adelia Plantation fronting Goodwood Boulevard—which has five, $1 million-plus active listings on the market. The development is tied up in litigation, with Hogstrom being sued by two investors who say they bought into the project based on several representations Hogstrom made, including one that the majority of lots were already pre-sold, and another that Adelia would be an upscale, custom-built neighborhood—neither of which, according to the suit, turned out to be true.
Moreover, the preferences of today’s million-dollar homebuyers, most of whom are millennials, are vastly different from previous generations, says local appraiser Winston Landry, who specializes in the high-end market.
Given the opportunity to tailor homes to affluent millennial tastes—generally new, clean, white-washed homes on smaller lots—spec builders create a new level of competition for the million-plus market, says Landry.
“There’s money in Baton Rouge, but there’s not enough money to fill that many houses over $1 million by the end of the year,” Landry says. “Baton Rouge is still the size of a town where a million-dollar sale doesn’t happen every day.”
What does this mean for the market? Gaspard, of RE/Max First, says it will likely correct itself, regaining health after the third quarter of 2020, after the presidential election takes place. Asking prices might drop slightly, encouraging more buyers to bite.
“When you get excess of inventory and a limited buyer pool, those 113 sellers are going to start competing for the next round,” says Gaspard. “If you watch the market, you’ll see an opportunity in the midst of that.”
EDITOR’S NOTE: This story has been corrected since original publication. The five $1 million-plus homes on the market in Adalia at Old Goodwood are not spec homes, as originally reported. Business Report regrets the error.